2026-VIL-81-GSTAT-KOL
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SGST Tribunal

GST – Refund of accumulated Input Tax Credit for inverted duty structure, Composite supply of packaged tea, Applicability of CBIC Circular No. 135/5/2020, Packing materials as eligible inputs – Respondents claimed refund of accumulated ITC under Section 54(3)(ii) of CGST Act for period 01.05.2020 to 30.06.2020 on ground that input tax on packing materials was higher than output tax on packaged - Revenue appeal contending that refund not eligible since both input and output are same i.e. tea attracting GST at 5 percent and relying on para 3.2 of Circular No. 135/5/2020 dated 31.03.2020 which clarifies that refund would not be admissible where input and output supplies are same – Whether appellant is entitled to refund under Section 54(3)(ii) of CGST Act when principal input is bulk tea and output is packaged tea despite both attracting same GST rate – HELD – On plain reading of Section 54(3)(ii) of Act, statute permits refund where credit accumulated because rate of tax on inputs is higher than rate on output supplies. Legislature consciously employed expression inputs in plural and made no distinction between principal input and ancillary inputs. Reading such restriction into statute would not meet ends of justice and lacks legislative intent - Comparing purchase of bulk tea with sale in small packages while ignoring other inputs like packing materials is factually incorrect. Term input has broad meaning defined in Section 2(59) CGST Act and includes all goods used in course or furtherance of business other than capital goods. Packing materials, labels, cartons and plastic containers are indispensable for marketing packaged tea and qualify as inputs - CBIC vide para 13 of Circular No. 79/53/2018 dated 31.12.2018 specifically recognises packing materials as eligible inputs. Output supply is composite supply with tea as primary supply taxed at 5 percent but packing materials are separate inputs taxed at 12 percent and 18 percent resulting in accumulation of ITC. Provisions of Circular No. 135/5/2020 applicable only where there is reduction in GST rate on same goods as indicated in heading of para 3 of Circular. In instant case tea when purchased in bulk and sold in packages attracts same rate i.e. 5 percent, hence circular not applicable - CBIC has no power to add to provisions of Act through circulars. Section 168(1) confines CBIC powers to issuing circulars for uniform implementation of Act. If taxpayer is entitled to refund under Section 54, same cannot be denied by circular issued under Section 168(1) – The order of First Appellate Authority upheld. Appellant is entitled to refund of accumulated ITC on packing materials under Section 54(3)(ii) of CGST Act – The Revenue appeal is dismissed
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